It's hard to read the headlines and not be confused.
Last week, the National Association of Realtors announced that existing-home sales in July had fallen an astounding 25.5 percent from the previous year. Then, just a few days later, some communities like Scarsdale and Edgemont were reporting that sales and prices had actually increased. A few days after that, Yahoo reported that sales prices nationwide had actually increased.
If this doesn’t make your head spin…
Even Time Magazine seems to be getting in on the fun. Their most recent issue, dated September 6, 2010, showcases an article about the pessimism of homeownership, detailing the economic woes of greedy financiers who handed out mortgages like candy to poor, unsuspecting folk.
But did Real Estate really kill the economy? This is certainly what many commentators seem to believe. Or did the economy kill Real Estate?
Don’t ask me, I ‘m still trying to figure out which came first, the chicken or the egg.
It’s important to remember though, beyond the media, that the real estate market still remains a good form of investment from a long-term prospective. And that's what I try to remind my clients.
How long is long-term? While in the past it was considered at least 5-7 years, statistics now show that at least 10-12 years is a better estimate.
Is it possible to help buyers feel secure again? You bet. Consider a few of these basic benefits of home ownership that I give out to my clients.
The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
Yes, this still happens. Real estate has long-term growth value that many other investments do not. Along with equity and time, a home’s value is set to increase.
Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home. When you carefully choose a house you can afford, the outcome can be significant. By paying your mortgage, you are building equity in a place of your own. Equity is the portion of the property that you actually own and increases by paying your monthly payments. Appreciation is most often an added bonus.
Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
Low Mortgage Rates
Many people who are buying at the moment are locking in mortgage rates of about 4.5 percent. A year ago, they might have paid 5.25 percent on a $300,000 loan for a monthly payment of about $1,657. Today, you could lock in a lower monthly payment of around $1,520 on a mortgage that size. Unlike rent, fixed-mortgage payments don’t rise over the years, so your housing costs may actually decline as you own the home longer.
The home is yours. You can decorate it any way you want, change the paint and install fixtures. Plus, you don’t have to worry about losing a security deposit if you scratch, dent or break something. And, if you are a pet owner, you know how hard to is to find a rental that allows them.
It's also extremely important to make sure that clients are only looking at homes that they can afford. What's the point of showing them a house that's out of their price range, even if they "just want to see it?" These dangerous actions leads to a whole lot of "no good."
One night, I was watching one of those bridal shows. The bride-to-be gave the sales consultant her budget, but her fiance saw another dress and wanted her to try it on, even though it was double her budget! In no way did the sales consultant wish to comply, but the fiance made her do it anyway. Of course, the bride-to-be loved it. But, it didn't matter. She couldn't afford it. Every dress she tried on afterwards was compared to that more expensive dress, and she ended up walking away without buying anything.
Real Estate is very similar. Showing clients a home without pre-qualifying them, getting to know their needs and truly protecting them, leads to unhappy clients and lost sales.
Was it really our fault that people were buying homes they couldn't afford? In some cases, maybe, if the clients were coerced. But in the end, its surprising to me at how un-accountable some people truly feel by their actions. And now, because of it, home ownership has come into question.